Question

62. Heavier intervention moves a nation’s exchange rate system nearer the        case, whereas less intervention

   moves the nation nearer the        case.   

            (a) fixed exchange rate; floating exchange rate        

(b) floating exchange rate; fixed exchange rate

            (c) managed floating exchange rate; crawling peg    

(d) crawling peg; managed floating exchange rate

63. Which of the following statements is incorrect?

            (a) A currency board is a monetary authority that issues notes and coins convertible into a foreign anchor

               currency at a fixed exchange rate.

            (b) A currency board usually lends money to the domestic government and domestic banks.

            (c) A currency board must hold the anchor currency that is at least equal to 100 percent of its domestic

               currency.

            (d) A currency board can operate in place of a central bank or as a parallel issuer alongside an existing

               central bank.

64. A currency board is a very effective way of maintaining        regimes.

            (a) pure floating exchange rate                  (b) managed floating exchange rate

            (c) fixed exchange rate                              (d) crawling peg

Answer 1

62. Heavier intervention moves a nation’s exchange rate system nearer the case, whereas less intervention

moves the nation nearer the case.

(A) fixed exchange rate; floating exchange rate   

Reason: Fixed exchange rates involve lot of government intervention to keep the exchange rate fixed, while floating exchange rates are free of government intervention and move with changes in market forces

63. Which of the following statements is incorrect?

(a) A currency board is a monetary authority that issues notes and coins convertible into a foreign anchor currency at a fixed exchange rate.

Reason: A currency board issues notes and coins along with the service of exchanging local to anchor currency at fixed rate of exchange

64. A currency board is a very effective way of maintaining regimes.

(c) fixed exchange rate

Reason: This is done by converting local currency into anchor currency at a fixed rate